The 340B Program: New Developments and New Opportunities for CAHs and Others Todd Nova Hall Render Wisconsin Office of Rural Health Hospital Finance Workshop August 30, 2011
What We Will Cover 2 340B Program Overview Background and Expanding Participation Program Scope Covered Drugs How to Obtain 340B Status Where to get 340B Drugs GPO Exclusion Prime Vendor Program Outpatient Drug Classification Eligible Patients Eligible Facilities Contract Pharmacies Program Integrity Orphan Drug Issue Practical Considerations
3 340B Program - Overview
340B Program - Overview 340B: High Level HRSA: Section 340B limits the cost of covered outpatient drugs to certain federal grantees, FQHCs and hospitals. The purpose of the 340B Program is to enable these entities to stretch scarce federal resources, reaching more eligible patients and providing more comprehensive services. 4
340B Program - Overview Estimated Savings: 25%-50% of a drug s Average Wholesale Price (may be higher or lower) 340B Program Benefits Access Expanded by ACA 5
340B Program - Overview According to HRSA: Has saved an estimated $5 billion in discounted prescription drugs Savings enable participants to provide more direct health care services Participation in the 340B Program is increasing at a rate of more than 5 percent per year 6
340B Program - Overview Pharmaceutical manufacturers that sell O/P drugs to Covered Entities and that want Part B payment for those drugs required to participate in 340B 7 Source: 2009 Annual Report, The Board of Trustees, Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds
Program Participation: 2004 2004 8
Program Participation: 2010-11 2010-11 Registered Covered Entity Sites 14,457 Contract Pharmacy Records 2,559 Manufacturers Records 849 Registered DSH sites 2,611 Registered DSH organizations 941 FQHCs 3,971 FQHC Look-alikes 210 Source: National Conference of State Legislators 9
Program Participation: 2010-11 Recent Program Enrollment As of October 1, 2010: 337 out of 1,500 eligible hospitals have enrolled Wisconsin currently has 191 participating providers 10
340B Program Expansion LEGACY Covered Entities Include: FQHCs 340B Program - Expansions FQHC look-alike DSH acute care hospitals Government or Non-profit with a contract with a State or local government to provide health care services to low income individuals who are not entitled to benefits under title XVII of the Social Security Act or eligible under [Medicaid]. 11 > 11.75% disproportionate share adjustment percentage
340B Program - Expansions Affordable Care Act NEW Covered Entities Include: Children s or Freestanding Cancer Hospitals but must meet all requirements applicable to (d) hospitals SCHs or RRCs Government or Non-Profit with a contract with state or local government to provide care to non-medicare/caid patient; AND DSH Payment Percentage >= 8% (not 11.75%) RRC is, not was (not grandfathered) 12
340B Program - Expansions NEW Covered Entities Include: CAHs Government or Non-Profit with a contract with state or local government to provide care to non-medicare/caid patients No DSH Payment Percentage requirements 13
14 340B Program - Expansions
15 340B Program - Expansions
340B Program - Scope 340B Scope/Overview Covered Drugs purchased by Covered Entity at a 340B discount, reimbursed by payors in ordinary course of business Savings for use in furtherance of safety net missions 16
340B Program - Scope Outpatient drugs Covered Drugs FDA-approved prescription drug Prescribed OTC drug Biologicals that can be dispensed only by prescription FDA-approved insulin Excludes vaccines BUT NOT Orphan Drugs 17
340B Program - Scope High Level Scope Program NOT limited to Medicare, Medicaid or low income patients. Any patient of a Covered Entity may receive covered O/P drugs purchased under the 340B Program But, Covered Entity must Maintain control of the patient s medical records Maintain primary responsibility for patient s care More on this later 18
340B Program - Scope High Level Scope (Cont.) Program discount extends to all main campus and provider-based location patients Definition of Covered Entity refers to the providerbased rules Patient must be treated at a facility that is provider-based to the Covered Entity Generally - sites must be within a 35 mile radius of the Covered Entity s main campus (some exceptions) More on this later 19
340B Program - Eligibility How to Obtain 340B Status? Apply to HRSA Office of Pharmacy Affairs to obtain approval DSH % based on most recently filed cost report See Wksht E, Pt. A, Ln. 8 (More later) If approved, applies at the start of the next Federal quarter 20 One month processing time in advance of start of quarter
340B Program - Implementation Where do we get the 340B Drugs? Covered Entity may contract with the drug manufacturers directly or work with a wholesaler DSH hospitals may not purchase covered outpatient drugs through a group purchasing organization ( GPO ) 21
340B Program - Implementation GPO Exclusion GPO Exclusion: Following entities not permitted to participate in a GPO or other group purchasing arrangement for covered outpatient drugs: Covered entities that are (DSH) but not RRCs or SCHs Children's hospitals Free-standing cancer hospitals 22
340B Program - Implementation GPO Exclusion (cont.) GPO Exclusion: Includes both traditional group purchasing organizations and pharmacy wholesaler s generic source programs Applies to all purchases of covered outpatient drugs by the 340B hospital, whether used for 340B or for non-340b patients Does not apply to 340B benefit coordinators 23
340B Program - Implementation GPO Exclusion (cont.) Affordable Care Act: Had applied GPO exclusion to CAHs, RRCs, SCHs But included various alternatives and mechanisms to utilize GPOs Reconciliation Act deleted these provisions Implications? 24
340B Program - Implementation Prime Vendor Program Access to sub-340b pricing on covered drugs (type of GPO) Only "exception" to GPO exclusion Access to reduced price supplies Use for I/P? 25
340B Program - Implementation Program Drugs Only for a Covered Entity s Outpatients What is an Outpatient Drug? Not inpatient Consider Medicare billing rules Appropriate to separately bill a drug as an outpatient charge rather than as part of an inpatient DRG? 26 Discharge Prescriptions: 1/20/2011 HRSA FAQ
340B Program - Implementation What is an Outpatient Drug? Appropriate to separately bill a drug as an outpatient charge rather than as part of an inpatient DRG? Discharge Prescriptions: 1/20/2011 HRSA FAQ 27
340B Program Patients What is an Eligible Patient? To be considered Eligible Patient of a Covered Entity that is eligible to purchase 340B Program drugs, must be treated at a facility that is considered to be provider-based to the Covered Entity under the Medicare rules. 28
340B Program Patients What is an Eligible Patient? (Cont.) Definition of a Patient from HRSA Website: individual is a "patient" of a covered entity only if: covered entity has established a relationship with the individual, such that covered entity maintains records of the individual's health care; and individual receives health care services from health care professional who is either employed by the covered entity or provides health care under contractual or other arrangements (e.g. referral for consultation) such that responsibility for care provided remains with covered entity 29
340B Program Patients What is an Eligible Patient? (Cont.) Definition of a Patient from HRSA: individual will not be considered a "patient" of the entity if only health care service received is the dispensing of a drug for selfadministration or administration in the home setting Simple HRA program NOT sufficient Circumvention disfavored Beneficiaries under self-insurance program do not automatically qualify 30
340B Program Patients 31 What is an Eligible Patient? (Cont.) Questions related to proposed 2007 guidance: Qualified 340B Entity provider capacity to issue the 340B prescription? Exact scope of nexus? Referral for care provided ongoing responsibility for service remains with covered entity May be referred for care for the same condition 12 month rule Ultimately, analysis is highly fact-specific.
340B Program Facility What is an Eligible Facility? Questions related to proposed 2007 guidance (Cont.): Any outpatient facility which is an integral component of a DSH will be included on the MCR and therefore eligible for 340B pricing (1994 guidance). What does included mean? HRSA position = As-filed. However, language = included on the hospital s Medicare cost report. 32
340B Program Facility What is an Eligible Facility? (Cont.) 2007 Proposed Patient Definition Guidance Reference to provider-based regulations. Ultimately, the facility s provider-based status must be reflected in the covered entity s Medicare Cost Report." 33 Covered entity may provide a copy of the attestation provided to its fiscal intermediary pursuant to 32 CFR 413.65 to demonstrate compliance with this guideline until such time as the facility is listed on the DSH s Medicare Cost Report.
340B Program Facility Provider-Based RHC An Eligible Facility? 2007 Proposed Patient Definition Guidance Outpatient services received from covered entity are: Provided by a location that qualified as a provider-based facility within a DSH under 42 C.F.R. 413.65. 35 mile distance limitation noted Provider-based Regulations: Free-standing facility means an entity that furnishes health care services to Medicare beneficiaries and that is not integrated with any other entity as a main provider, a department of a provider, remote location of a hospital, satellite facility, or a provider-based entity. We understand there are provider-based RHCs currently participating as 340B covered entity facilities. 34
35 340B Program Facility
340B Program Contract Pharmacies Contract Pharmacies No distance or proximity limitation on contract pharmacy arrangements 340B Program does not directly impose a distance limitation on where patients may obtain 340B Program drugs No (longer a) limit on number of contract pharmacy arrangements Challenges: 36 Diversion tracking Audits & records Discount management and tracking Data exchange
37 340B Program - Integrity
340B Program - Integrity Issues to Track Medicaid duplicate discounts Medicaid patients may be excluded Who is a patient? What is a facility? Contract pharmacy commingling Contract pharmacy patient tracking Data exchange (PHI, remote hosting, etc.) 38
340B Program - Integrity How do I Track? Methods used to ensure compliance with Program standards Up to the Covered Entity Program and non-program drug stock Need not be physically separated Main obligation for Covered Entities Maintain auditable records that can be used to prove 340B drugs used only for covered outpatients 39
340B Program - Integrity 340B status can be lost due to changed circumstances Duty to report 40
340B Program - Integrity New Penalties PPACA statutory updates Consistent with HRSA guidance issued December 1996 Clearer program integrity requirements for both manufacturers and providers In particular, the provisions addressing provider-related enforcement options (Section 256(d)(2)(A)(v)) provides for the following remedies "in appropriate cases as determined by the [HRSA] Secretary : 41
340B Program - Integrity New Penalties (Cont.) Where a covered entity knowingly and intentionally [sells drugs purchased using a 340B Program discount to persons who do not qualify as covered entity 'patients']: required to pay monetary penalty to applicable manufacturer forfeiture of the discount received for the inappropriately dispensed drug(s), plus interest thereon 42
340B Program - Integrity New Penalties (Cont.) Where 340B drug to persons who do not qualify as covered entity 'patients was systematic and egregious as well as knowing and intentional: Covered Entity may be removed from the 340B Program and be disqualified from re-entry into the 340B Program "for a reasonable period of time to be determined by the Secretary." 43
340B Program - Integrity New Penalties (Cont.) Notwithstanding the foregoing, HRSA may also: Refer matters to appropriate Federal authorities within the FDA, the HHS OIG, or other Federal agencies for consideration of appropriate action under other Federal statutes, (e.g., PDMA) Current NPRM 44
340B Program Orphan Drugs Orphan Drug Issue May 20, 2011 Notice of Proposed Rulemaking Affordable Care Act contained a restriction on the use of Orphan Drugs by New Covered Entities. Restriction includes: Freestanding Cancer Hospitals; SCH; RRC; and CAH 45
340B Program Orphan Drugs Orphan Drug Issue (Cont.) A drug is designated by the FDA as an orphan drug at the request of the sponsor if FDA finds that the drug is being or will be investigated for a rare disease or condition Orphan drug must have received FDA marketing approval to meet the definition of 340B covered outpatient drugs 46
340B Program Orphan Drugs Orphan Drug Issue (Cont.) Covered entities are confused. Some manufacturers waiting for Federal policy before taking action Other manufacturers have stated they will stop selling orphan drugs through the 340B Program to newly-eligible covered entities effective immediately Whether or not used for purpose related to orphan status 47
340B Program Orphan Drugs Orphan Drug Issue (Cont.) Some of the restricted 340B entities are large orphan drug users If restricted from using orphan drugs under 340B, but subject to GPO exclusion, would effectively exclude intended certain intended beneficiaries from 340B Program 48
340B Program Orphan Drugs Orphan Drug Issue (Cont.) Proposed rule would limit the prohibition to uses for the rare disease or condition for which the orphan drug was designated Non-orphan / common indication uses would be permitted Question: how to track? 49
340B Program Practical Application Practical Application Discharges When does I/P become O/P? When does O/P become I/P? (e.g., bundled ER services) Consider Medicare billing guidelines Remember: 340B Patient definition Extension options Provider-based chess game and contract pharmacy arrangements) Tracking/maintenance of 340B stock Policy implementation and integration 50
Questions? The 340B Program: New Developments and New Opportunities for CAHs and Others Todd Nova Hall Render Wisconsin Office of Rural Health Hospital Finance Workshop August 30, 2011